International investors divide into different currency creeds. First, there are the money monotheists, who use one reference currency for measuring their wealth and its growth over time. Monotheists ‘dream’ in a currency whose volatility in real purchasing power is believed to be small. The money polytheists are not content to use only one reference money, realizing that each has potential weaknesses as an ultimate standard of value. They measure their wealth, and investment calculations, against a basket composed of two or more monies in constant proportion to each other. The money agnostics reject the use of a standard composed of currencies in fixed weights. They are searching constantly to assess the ‘real’ purchasing power of their wealth and its optimal investment measured in terms of consumer purchasing power now and in the future. The agnostics must redetermine incessantly the currency mix of their standard by questioning the fundamental qualities — the hardness or softness — of each component money.
KeywordsExchange Rate Transaction Cost Real Exchange Rate Small Bank Swiss Franc
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